Despite the increasing cost of living, Australians continued to prioritise spending on travel and entertainment, according to the latest CommBank iQ Cost of Living Insights Report.
The report, based on spending data for the September quarter compared to the same period in 2022, revealed that quarterly spending on essential goods and services has risen but remained below inflation, while discretionary spending was overall flat.
Essential spending has increased, particularly in areas such as insurance, medical costs, and pharmacies. On the other hand, travel and entertainment were the only discretionary categories to record above-inflation growth at 8.2% and 8.6%, respectively, compared to an 8.1% decline in household goods spending.
The CommBank iQ report showed that Australians aged 25-29 were the worst hit, experiencing a 5.1% decline in total spending, and was the only age group in which both discretionary and essential spending decreased. Despite this reduction in discretionary purchases, consumers in their twenties continued to allocate budget for entertainment experiences, up 13%.
“Leaving room in the budget for experiences is a continuing trend. However, they are having to reduce spending in other areas,” said Wade Tubman (pictured above), CommBank iQ Head of innovation and analytics.
“We’re seeing consumers in their twenties cut back spending but still leave room to fund experiences. We’ve also seen younger people redirecting discretionary spending from things like clothes and homewares, to spend on cinemas and ticketed events such as concerts and sport.”
Geographical spending patterns indicated that regional Australians are outpacing metropolitan consumers in spending growth (2.9% vs. 1.2%), reflecting the impact of housing costs on city dwellers. The gap was most prominent in New South Wales and Victoria.
“We’ve seen lower or negative discretionary spending growth in metropolitan New South Wales and Victoria where many people are grappling with higher rents and mortgages,” Tubman said.
Looking into specific categories and states revealed that consumers were choosing to divert spending to entertainment, with cinema purchases up 31% and spending on ticketing services (concerts and sport) climbing 18%. Travel spending increased overall, with growth in cruises and online travel bookings, increasing 55.3% and 34.4%, respectively.
Across states, South Australia and Western Australia recorded the strongest spending growth per capita, and NSW and Victoria the weakest growth. The report suggested a divide between regional and metro spending, with discretionary spending remaining steady in regional Australia, indicating that metro residents are reallocating discretionary spend to cover higher fixed costs.
Age-related spending trends showed that Australians aged 25-29 increased their spending on entertainment by 13%, while simultaneously experiencing declines in spending on household goods (-17%), apparel (-10%), and retail services (-9%). Conversely, people over the age of 65 showed an increase in spending on travel (up 17%) and dining out (up 11%), CommBank iQ reported.
For more information, download the Cost of Living Insights Report.
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